L.A. film company files lawsuit over early end of joint venture
A Los Angeles film company that invested in a $500-million fund to co-finance Sony Pictures movies filed a lawsuit alleging that the fund’s manager and a later investor cheated it out of at least $44 million.
Aramid Entertainment Fund alleged in a lawsuit Wednesday that the Sony fund, which co-financed 18 movies since 2008, was shut down late last year in a manner that benefited both fund manager Relativity Media in West Hollywood and the investor, New York money management firm Fortress Investment Group, at Aramid’s expense.
The suit, filed in Los Angeles County Superior Court, alleged that the defendants committed fraud and breach of contract.
A spokesman for Fortress did not respond to a request for comment. Spokesmen for Relativity and Sony declined to comment.
Aramid said in the suit that it invested $22 million in the fund, formally called the Beverly Slate Fund. Citibank, also an investor, and its affiliates recruited Aramid and other investors.
The Beverly Slate deal allowed Relativity to choose from among most Sony productions to co-finance up to 45 movies over a five-year period. Films it has co-financed included the Adam Sandler comedy “Grown Ups” and the Kevin James comedy “Paul Blart: Mall Cop.”
According to the suit, Aramid gave Fortress access to its private financial information, including details of the Beverly Slate arrangement, as part of talks to buy some of Aramid’s assets.
The two firms did not end up making a deal, but Aramid alleged in the suit that Fortress improperly used that information to buy into the Beverly deal later.
Late last year, the lawsuit alleged, Fortress arranged to buy out Citi’s interest in Beverly Slate for $113.5 million when it was worth $226.7 million. At the same time, Aramid said, Fortress persuaded Sony Pictures to end the deal in December even though the terms allowed Beverly to keep funding movies through 2013.
To close Beverly Slate early, Sony allegedly paid the fund up to $214 million as a return for financing the 18 films. The lawsuit alleged, however, that if the fund had continued through next year, Sony would have had to pay Beverly Slate up to $222 million more.
The arrangement allowed Fortress to make a gross profit of about $96.1 million, according to the suit, and Fortress paid Relativity $14.5 million to go along with the early closing of Beverly Slate.
Relativity needed the money, the suit alleged, because, after several box-office disappointments, Relativity was under financial strain last year and its relationship with former backer Elliott Management ended.
The lawsuit said that Aramid was cut out and received no return on its original $22 million investment, which would have been worth at least $44 million had the Beverly fund continued making movies.
The suit said that Relativity represented to Aramid throughout the fall that Beverly would co-finance several upcoming Sony films, including “21 Jump Street” and a new Adam Sandler comedy, “I Hate You Dad.”
Instead, the suit alleged, Relativity worked with Fortress and Sony to close the fund early.
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